May 27

Alliance Healthcare IPO: 7 Things You Need to Know about It

On 24 May 2019, Alliance Healthcare Group Ltd (AHG) has opened an invitation to the public to subscribe its IPO shares at S$ 0.20 per share. Its IPO Prospectus can be downloaded here – AHG’s IPO Prospectus.

Application for its IPO shares would close on 29 May 2019 and its listing date is set to be on 31 May 2019.

Question: ‘Should I subscribe IPO shares of AHG?’

Personally, I’d studied its IPO prospectus and would like to share my findings on AHG in this article. Thus, here are 7 main things to know about AHG before you subscribe to its IPO shares.

#1: Business Model

AHG is involved into four key business segments.

 

alliance healthcare about us

They include:

  1. Managed Healthcare Solutions
    AHG offers a diverse range of managed healthcare solutions to two key groups of customers: corporations and insurance companies. Presently, AHG has entered into agreements with eight major health insurers and is serving over 2,000 corporations via its self-owned clinics and a panel of 1,000 medical service providers in Singapore.

  2. GP Clinics Services
    AHG operates 17 GP clinics, where 16 of them are operating under the branding of ‘My Family Clinic’. It has 1 clinic operating under ‘Lee Clinic Pte Ltd’.

  3. Specialist Care Services
    AHG operates 5 specialist care clinics, where it consists of 2 ENT clinics, 2 colorectal clinics, and 1 orthopaedic clinic. The 4 clinics are presently 100%-owned by AHG except for the orthopaedic clinic where AHG has 51% stake in it.

  4. Pharmaceutical Services
    AHG procure pharmaceutical products and medical devices via Alliance Pharm, its wholly-owned subsidiary. Alliance Pharm has been granted a wholesale pharmaceutical license issued by the HSA and sources for its products from reputable partners in Singapore and overseas and would distribute them to hospitals, pharmacies, and clinics across Singapore.

#2: Breakdown of Revenue 2018

For financial year (FY) ended 30 June 2018, AHG has reported to make S$ 33.82 million in revenues.

Contributions from the four segments above are as follows:

No.

Key Business Segments

Amount

(S$ ‘000)

Amount

(%)

1

Managed Healthcare Solutions

4,912

14.5%

2

GP Clinic Services

15,575

46.1%

3

Specialist Care Services

4,807

14.2%

4

Pharmaceutical Services

8,523

25.2%

AHG’s Total Revenue 2018

33,817

100.0%

 

#3: Financial Track Record

alliance healthcare financials

For the last 3 FYs, AHG achieved higher revenue and shareholders’ earnings. Its revenues had risen from S$ 25.85 million in 2016 to S$ 33.82 million in 2018. It is contributed by sales growth from all of the four businesses stated above.

Shareholders’ earnings grown from S$ 0.83 million in 2016 to S$ 3.48 million in 2018. Its earnings per share (EPS) increased from 0.25 cents to 1.48 cents in the 3-year period.

Meanwhile, AHG’s Return on equity (ROE) has grown from 20.5% in 2016 to 45.5% in 2018. This is contributed by improvements in profit margins from its managed healthcare solutions, specialist clinics, and its pharmaceutical divisions, which had offset the profit decline from GP Clinic services.

Figures in S$ ‘000 unless stated otherwise

Year

2016

2017

2018

Revenue

25,846

29,439

33,817

Earnings

513

1,345

3,080

EPS (Cents)

0.25

0.65

1.48

ROE (%)

20.53%

36.42%

45.53%

 

#4: Balance Sheet Strength

As of 30 June 2018, AHG has S$ 3.12 million in non-current liabilities and a total of S$ 6.77 million in shareholders’ equity. Therefore, its gearing ratio is 46.05%.

In that period, AHG has reported to have S$ 18.98 million in current assets and S$ 16.84 million in current liabilities. Thus, its current ratio is 1.13.

Year

2016

2017

2018

Gearing Ratio

38.23%

23.21%

46.05%

Current Ratio

0.78

0.89

1.13

Calculated from Data Sourced from IPO Prospectus of AHG

#5: Utilization of IPO Proceeds

AHG intends to raise S$ 6.4 million in gross proceeds from this IPO exercise. Out of which, AHG intends to utilise it:

1. Group Expansion: S$ 3.0 million
AHG intends to expand its network of GP clinics, specialist clinics and as well as medical facilities in Singapore. In addition, it plans to embark on a series of strategic alliances, acquisitions, and joint ventures.

2. Digital Transformation: S$ 0.5 million
AHG budgets S$ 0.5 million in investments into technology systems. For instance, it hires an IT vendor to build centralised clinic management & electronic medical record system for its self-owned GP clinics. Also, the group is developing an Electronic Queue Management System (e-QMS) to enhance experience and satisfaction of its patients at its GP clinics.

3. Expand Pharmaceutical Segment: S$ 0.2 million
It intends to upgrade of its storage facility for pharmaceutical products, establish its presence in Malaysia and bring in more products lines that would be used in its self-owned and panel clinics across Singapore.

4. General Working Capital: S$ 0.8 million

5. Listing Expenses: S$ 1.9 million

 

#6: Management

Upon the listing of IPO shares, Alpha Investment Holdings would emerge as the main shareholder of AHG with 64.2% shareholdings.

Alpha Investment Holdings (AIH) is currently owned by:

No.

AIH’s Shareholders

AIH’s Shareholdings (%)

1

Dr. Barry Thng Lip Mong

62.0%

2

Dr. Loh Cher Zoong

19.5%

3

Dr. Goh Tiong Jin

5.7%

4

Dr. Yun Kok Onn

12.9%

Alliance Healthcare Barry Thng Lip Mong

Dr. Barry would emerge as the ultimate key shareholder of AHG as it owns 62% of AIH, which in turns, holds 64.2% of AHG.

Dr. Barry is appointed as Executive Chairman and CEO of AHG and would be influential to its future directions.

#7: Valuation

The IPO share is offered at S$ 0.20 per share. Based on 207.9 million shares, its market capitalisation works out to be approximately S$ 41.6 million.

In FY 2018, AHG has made 1.48 cents in EPS and 5.58 cents in net assets per share. Thus, it has a valuation of P/E Ratio of 13.51 and P/B Ratio of 3.58.

AHG does not have a fixed dividend policy.

Conclusion:

AHG has recorded improved financial results for the last 3 years and maintains itself a healthy balance sheet. So, should you subscribe to AHG’s IPO shares at S$ 0.20 a share?

Leave your comments down below!

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